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Mortgage lending continues to rise, says Bank of England


The number of loan approvals for house purchases rose by £1bn in December compared with the previous month to £12.4bn, according to Bank of England figures out today.

This is reflecting what we are seeing in the marketplace. The Government’s Funding for Lending scheme continues to make more money available at cheaper rates to lenders, and this is trickling through to borrowers.

We are also seeing welcome innovation return to the market, which should continue to boost the numbers taking out mortgages in coming months. Clydesdale’s ‘low-start mortgage’ whereby borrowers can take an interest-only loan of up to 80 per cent LTV for the first three years, before switching to a repayment facility, is likely to be popular and imitated by other lenders.

Barclays’ Family Springboard Mortgage, also launched this month, enables parents to offset their savings against their child’s mortgage without actually handing over the funds, enabling the child to buy with just a 5 per cent deposit. More innovation like this will really help boost the housing market.

The private banks continue to be the ‘go to’ option for wealthy borrowers requiring large loans, particularly those with complex income arrangements or who require interest-only mortgages. Those who are asset rich but income poor they also find a solution.

The number of homeowners remortgaging fell slightly in December compared with the previous month which is surprising, given the raft of excellent rates now available. However, the numbers were still higher than the previous six-month average indicating an upwards trend nevertheless. Some borrowers will no doubt be waiting to see whether mortgage rates fall further before taking the plunge and remortgaging – the way things are going, you wouldn’t bet against that happening.

In its Trends in Lending report, the Bank notes that rates on fixed-rate mortgages at lower LTV ratios fell by more than 50 basis points over the second part of 2012 and that some major lenders expected a fall in pricing at higher LTV ratios in 2013. This is already happening, albeit slowly, but is good news for those with more modest deposits.

Adrian Anderson
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Adrian Anderson

Private banks the answer to interest-only mortgages


The New Year may barely have started but with two high-street lenders already tightening interest-only criteria, 2013 looks set to be a tough year if you require an interest-only mortgage – unless you go to a private bank.

Yet while lenders are reining back on interest only, borrowers still demand it. We have seen a significant increase in clients seeking interest-only options as several high-street lenders including RBS, NatWest, Nationwide and the Co-operative Bank, have stopped offering interest only to new borrowers. Other lenders have severely restricted their interest-only terms, meaning many borrowers no longer qualify.

The latest changes from Woolwich and Virgin Money are more tweaking the detail in terms of minimum loan sizes and maximum loan-to-values rather than abolishing interest only outright. But the conclusion is inescapable: interest only has become a niche product. It may be possible to borrow on interest-only terms via high-street banks but it is much trickier than in the past.

Private bank mortgages

However, there is an alternative. The private banks continue to offer interest-only terms to clients who are wealthy or on track to become wealthy at some point.

If you have a remuneration structure with a significant element paid in annual bonuses or stock and share allocations, or there is a realistic and viable anticipation of a future capital event, or you will sell a property to pay off the capital, then it could make sense to borrow on an interest-only basis.

Contact Anderson Harris to discuss your interest-only requirements.

Jonathan Harris
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Jonathan Harris

Make 2013 the year you get on top of your mortgage


The beginning of a new year, when not much is going on, is a good time for taking a long, hard, critical look at your finances and the biggest outgoing of them all – the mortgage. This is particularly important this year when finances are likely to be a little tight.

First, consider your existing deal. If you are on a fixed-rate mortgage or base-rate tracker, and would incur an early redemption charge for switching to another deal, it may be worth staying put for now. Make a note when your current deal ends – if it is at some point during this year, you will need to take action. Diarise it; about six months before that date, book at an appointment to see an independent finance specialist such as Anderson Harris, to talk through your options. New deals can be secured up to six months before you actually take them out, depending on the lender, so leave plenty of time to find a new one.

If you are on your lender’s standard variable rate (SVR), you need to decide whether to stay put or remortgage. Much depends on the SVR you are paying, your income and how much equity you have in your home. If you are paying more than 3.5 per cent, and have at least 25 per cent equity in your home, you should find a cheaper fix or tracker, so should consider remortgaging. Your lender’s SVR will not get any cheaper: indeed, it will only rise when base rate starts to increase and may do so quickly.

Those who are on really cheap SVRs or ‘go to’ trackers, may want to stay put for now. If you do, it makes sense to use money ‘saved’ each month to reduce your mortgage further.

If you require interest only, have complicated income streams, or are an ‘older’ borrower, seek independent advice. You might find it tricky to source a mortgage on your own but we might be able to help, particularly if you qualify for finance from a private bank.

The important thing is to take action – even if it is only to reaffirm that you are on the right deal for your circumstances at the present time. There is no room for complacency: while forecasters can’t agree when interest rates will rise, they will at some point. The smart borrower will take advice if they are unsure and take time to prepare for whatever 2013 may have in store.

Adrian Anderson
Posted by
Adrian Anderson